88 [From the faohirigton Post, June 23,

Profit.Makiirtg Schools Deception and Expl oitation Charged By Eric Waneuf1 048 Pi a lt wrici1ff W91111411111. Businessmen who run schools to make money have, In many cases, been exploiting federal student aid programs at the expense of the young Americans those programs are sup. posed to benefit. Salesmen motivated-like the schools' owners--more by earnings

dropped out because the course proved too difficult, and said the school was refusing to help straighten out his problems with the bank. rn another case, a group of young people recruited by an airline personnel school in Hartford, Conn., through what-ay allege were numerous false cbis ame saing. the school for damaes. The majority had been signed up to federally Insured loans to help pay their tu!Uons Sllmen eager Tor commissions

than educational ideals have gone hunting for customers In the ghelto of Atlanta, Boston and LoS Angeles, in Greenville. S.C., and Shreveport. La., In the public housing of Ardmore, Okla,, in the food stamp lines of San Antonio, Teax..in the barracks of Army bases In West Germany and even- In a halfway house for mental patients tI the Pacific NorthwesL Dangling dreams of quick training for well-paid jobs as computer pro. r:amers, color-televisIon technicians, executive secretaries, motel makers or airline hostesses, they have lured .-nun, consumers Into contracts that. often lead to debts and disillusoament. One victim. an Atlanta welfare mother. complained a finance company wax dunning her to repay nearly $500 on j federally insurfd student oait for threee weeks she spent at a local build. .esscollege. She dropped out because conditions were poor and the school wanted more money. .Another, a veteran In Duluth, Mine. wrote his congressman in desperation because a Chicago bank was demand. ing a $40 repayment on his student loan which he didn't think he owed. He had been lured into a correspondence course In color-televlsion technology,

have often failed to spell out the finnclsA fine print when they sign up unsophisticated customers to enrollment contracts and loan applications They habe sometimes misled them to think, for example, that they will only have to repay their loans after landing that Job for which they'll be trained. Many young customers come from low4noome families. hold unrewarding jobs - If they're employed at all and have missed out on less costly educational opportunities such as public community colleges. Protection Lacking Yet the government, while offering subsidies for their schoollng-subsdies which salesmen use as bait-has failed time and again to protect these young Americans from fraud and needless financial losses. At the same time, the government has filed to protect the taxpayer. It has doled out tens of millions of dollars on Insurance claims for defaulted student loans and tens of millions more on GI BIll benefits for wasteful correspondence courses. These conclusions result from months of reporting by The Washing. too Post on education's profit-seeking sector and the public and private agen. cles which are supposed to keep it henet, The rnultblllon-dollar industry has thousands of members, from mom-andpop secretarial schools In small Southe* towns to nationwide chains and correspondence course factories owned by International Telephone and Telegraph, Control Data. Bell & Howell, Montgomery Ward and other large corporaions. While enrollment figures vsar. widely, the Pederal Trade Commission bas estimated that Industrywide total at more than 3 million students -

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ltt gti

1974]

which would be at least one-third of the total for all public and private non. roft colleges and unlvLrsities. Bell & owell alone recently reported 150,000 students in its correspondence courses *nd another 10.000 In classrooms. Which would make it as large as the gegire University of California system. Wlhat sets the industry's members apeit from UCLA, Yale or your local eakmunity college is that they're all cqmmercal ventures, selling education for profit. A number of buslnessmen-educators undoubtedly run respectable operations. Advance Schools of Chicago. one of the big correspondence schools rel)lag heavily on federally insured loans a&d the G1 Bill, is eyed askance by some who find Its reputation somehow too good to be true.-But Sherman T. Ch.ristensen, -founder and now chairman of Advance Schools. makes a strong case that Its recrul ing is scru pualous, its business practices ethical and fair, its courses properly educe. tional and its 72,000 students relatively atsfted. On the other hand, scores of intel views with a variety of sources and scrutiny of numerous public and colldentlal files have turned up many cx. Samples Involving other schools of de ceptive advertising, predatory recruit. ing, wrongful withholding of refunds and other unscrupulous or irresponsiblepractices. Industry spokesmen. sensitive to orcaslonal exposes. contend') profit-seek. Ing schools shouldn't be singled tout for criticism. After all. they argue. nonprofit colleges, hard-pressed to fill classroom and balance budgets these days, have begun resorting to tommerrlat recrulUng tactics, too. But the fact remains, based on avail. able evidence, that It is in the prof. soeking sector where abuses have been aoe frequent Nd extreme, and where the human as well as the public coast bave so far been the greatest. Dropout rates have exceeded 50 per ,eat In some profit-seeking classroom schools and run 15 per tent or more In many correspondence schools. True. rates are also high among nonprofit private and public colleges-wihere one 19l study showed fewer than half the freshman would finish two-year pro. grams and only one-third would finish four years But the profit-seekers. selling shorter courses aimed at specific ,a reers, could be expected to hatelo'r rites than most. Their dropout %I In most cases have signed contrary ,I take and pay for 4n entire t'ur. ,, ten quit at an early stage. Sludelf. at

89 While some p"At-mem"ing schools nonprofit colleges usu paYby the semester. and drops tend te leave for one reason w' another hae shunned heavy involvement In Sedge proat semester's end. Neither profftseekift nor nonprofit grams, others have ingreasily used schools boast perect scores In gradu. them to fulet advantage to enroll ate job placements-witness recent re- large majorities of their students. In the federallflbsured student loan ports of Ivy League graduates driving taxicabs, But for the profit4eekers. program, for example, profit4eeking training for jobs-.tripped of broader schools generally have been accounteducational objecftve--Is the name of ing for about onethidd of the total the ame Certainly profItseeking schools have mulUbllion4tLar volume. B* In the been setting the pace wbn it comes to 107 fiscal year, according to 'govertmkrheting. They advertise widely in meat fture three school owners all sorts of magauias-from PentSchoola, Bell & Hohouse to Popular Uecancs-43 well aone--Advance as newspapers sAd the Yellow Pages. well and IMotgomery W rd..enrolled They promote ther services on match- more than 200,000 tusued-oen borrow. book covers and postcards. a well a er In the January.March, 1973, quartelevision. Some usenmt mailing. ter, those same three accounted for Others canvass by telephone. And more than $55million In new-loan volthose that find salesmen productive According to a detailed IM report ume, or neary 20 per cent of the total on the industry by Eubusness, Inc., for all Institutions In the program. And according to Veterans Adinls. of New York Mty. profit4eeking schools generally spent only about 20 traUon data pubUshed last fall, a dozen per rent of their budgets on instruc- profit-seeking schools each enrolled tion but up to 80 per cent on market. more students under the GI Bill during. ing 172 than even the largest state •Good sales representatives," Edubu- university campuses. Profit4eekins schools gained access siness reported, "commend annual salaries considerably higher than those to the federal student subsidies In the Congres follovid the precmld.lNe0L staff " according the teaching One recent example was the maga. edent of prior vetern-aid programs ine ad to recruit salesmen run last In including them when It revived the fall by Atlantic Schools, a subsidiary 01 Bll In 196. The lawmakers made of National Systems, Inc,, sellng them eligible for the Insured-loan procourses In the airline-travel field. gram, and sine then for other Office "Generous commlstousl" the ad prom- of Education student aid, oq grounds ised. "Just five sales per month can that vocational education under all earn tou over $10,000 annually. Many legitimate auspices merited more recof our salesmen earn more than We.- ogniUon and support. 000 per year-and up to $40,000." Eligibility for these programs Weaver Airtine Personnel School. greatly broadened the potential stuadvertising for salesmen In The Wash. dent market for proflt-seekiln schools ington Post help-wanted columns last by giving millions of young people the ov. 18. offered salesmen "high com- financial means to enroll. It was doubt. missions plus monthly annual bonuses lees a factor, In the late l90s, in atand our TOP reps have won extra bo- tracting Bell & Howell, McGraw.Hill, nuses. from a car to a European vaca- Montgomery Ward, Control Dais. ITT, tiOlL" Lear Siegler. LTV and other corpora-

Uns Into what seemed a lucrative new field. Their involvement, through acquisitions and new ventures, brought fresh resources and apparent respec. tibablllty to an Industry still dotminated numerically by far smaller en. terpriss. Education profits have in fact proved elusive for many companies. large and smalL A variety of management problems, the rising rivalry of lowv4ulton pubUc community colleges, and a roller-coaster national economy have spelled slim earnings for quite a number and heavy losses for some. LTV and Lear Slegler have cashed In their chips. Most companies, however, are stay. lag In the game. And the industry as a whole has clearly emerged from the educational backwaters it Inhabited for decades into the mainstream. Look. ing ahead, school owners can expect a new boon for recruiting If the governmeat's recent "basic opportunity grants" for low-income students are funded at more than $1 billion as the Nixon administration has proposed.

Developing Shift

Moreover. they stand to gain at least In the short run from the developing shift In student goals away 'from tradi. tonal liberal arts degrees and into programs geared toward work-world careers. Meat-and-potatoes career train. ing, after all. is the industry's longclaimed specialty. North American Acceptance. in turn. was Acquired and owned until recently by Omega-Alpha Corp.. the conglomerate that financier Jim Ling put together after Ids ouster from control of LTV. Under new ownership. Blayton built enrollment by aggressive recruiting By one account, a team of salesmen would telephone local high .school graduate& The alesmen would offer them a ride to the school in a company-owned station wagon to inspect

90 its facilities - includin- the plushly furnished president's office and reception rooms .-- and to view a recruitn

fim. Those persuaded to enroll would be signed up, in practically every cae, to a federally isured loan from North American Acceptane. All told, according to Office of Education estimates, the finance company's insured-loan volume soared by last summer to $1.3 million. By last August, however, the federal agency's Atlanta office became con-

cerned by Blyton's high dropout rae and a growing number of loan defaults and complaints from onetime students. One handwritten complaint came from Linda Sloan, an Atlanta welfare mother. "I have received a number of letters and telephone calls from North American Acceptance." she wrote. "They are asking for money that I do not think they deserve. They are tell. ing me that I borrowed almost $00 from them. I have never been there be. fore in my life. This money is for a couple of weeks that I went to Blayton Bus. College. i signed a contract but was not per. mitted to read it because they said that it changed so often that 'by the Ume you start classes It will be different' I was also told that during the first week of school, I woud be offered a Job. (None of this was tyue.) 1 went for about three weeks," she continued. 'and after I found out that I was expected to pay over $1,000 I went to the office and told them I had quit. All they said was o.k. They didn't even make a note of it. I have been telling these people that I do not have a job, but they keep making all kirids of threats. They say I went to school for 35 days. I did not. I didn't even have a perfect attendance record the short time I was enrolled. The conditions there were poor. and I think it Is unfair for them to force

me to pay this much money hr nothing..."

Student Walkout Last Aug. 20, an estimated 150 students-three-fourths of Blayton's largely black total enrollment at the time-4taged a walkout to dramatize their compalints about the school. Their long list of grievances included a misleading catalogue (in which white employees of North American acceptance allegedly posed in photographs a students so it appeared the school was Integrated), low admlissiota standards, unqualified teachers. Insufficient equipment, unavailable courses, decepUve sales pitches and exorbitant tution. The students, were also upset by the resignation of Mrs. Terry Davis, the school's black placement director. Mrs, Davis said she had become disenchanted herself by the school's inferior quality, which made it hard for her to find jobs for Its graduates, and was frustrated by undue restricUonm on her work. The last straw came. she said, when the school's administrators -who claimed later that she had been unproductive--sought to hire a second placement director without telling her. The Blayton students who walked out evidently hoped their demonstraUon would force the school to make some Improvements. Student protests bad been common enough on college campuses Occasionally they had led to violence-far more often, to reforms. The last thing the Blayton proest.rs expected was that the school's adminstrators would summarily expel them. But that, In fact. was what happened. And with publicity about the protest causing enrollment cancellations among fresh recruits scheduled to start classes in October. Bl4yton officials decided they would simply close down the school when the summer term ended. While the expelled students reportedly had partial refunds Credited to

their North Amerian AtvepUince loan accounts. depending on how long they had been enrolled, they were still faced with repaying the rest of their loans--for an unrewarding, unfinished, dead-end education. Edward L Batty, a lawyer retained by Mrs. Davis to represent her and the students, decided to file suit against North American Acceptance to free the students if possible from their repayment obligations. He was "on the way to the court. house." Batty sald, when he picked up a newspaper, read that North Ameri. can was filing for bankruptcy, and gave up his mission.

Huge Legal Tangle Baety said recently he saw Utile hope for the students in adding an. other, relatively minor lawsuit to what has become a monstrous legal tngle. Thecollapse of North Ameriean Ac. ceptance (sold by Omega-Alpha last August to GCI International, Inc.. a Calfornia holding company) has touched off a flurry of investigation plus class-action suits on behalf of some 12,000 Georgia investors who were left holding an estimated $40 mil. lion In short-term North American Acceptance notes. And the Blayton students weren't out of the woods. Robert E. meks. North American's court-appointed trustee, said he was legally obligat to "maximize" the finance companys assets in the interests of Its cetr That meant. he added, that an "effort will be made"-bowever unpopular-4o collect from the student boarrowe. Should the students refuse to repay their loans. North American Aeept. ance through Its trustee would prewma. ably file claims for federal insmnc on the defaults. And if the government paid those claims, it would then set about collecting from the students It. sell As things stai, the Insured loan program allows forgiveness of debts only for death, disabbity or personal bankruptcy. Time and again, where a profit-seek. Ing school misled or short-changes its students. overlooked Office of Edug. tion collection officials have been later assigned to extract money from the victimSaid one official, "1 can't find it In my own conscience to go out and col. lect from these people." NEXT: The Victims